I Lost My Job! Should I Do COBRA or ACA?
Losing your job comes with many headaches, including a change in health insurance in many cases. COBRA coverage is one option, but so is a plan under the Affordable Care Act (ACA). So how do you know which one to choose? The decision may be easier than you think.
What’s the difference between COBRA and ACA?
It may seem like you’re wading through alphabet soup when you look at these two options. Start by understanding what each one is.
COBRA, or the Consolidated Omnibus Budget Reconciliation Act, allows you to stay on your employer’s group health plan at your own expense, says Tasha Riggs, sales leader for HealthMarkets in Westminster, Colorado. It also covers your spouse and any dependent children if they elect to be on the plan.
The most important thing to know: You’ll pay the full cost of the premiums, including the amount your employer used to pay. You might also pay an additional 2% administrative fee, says Katie Keith, JD, MPH. Keith is an associate research professor at Georgetown University’s Center on Health Insurance Reforms in Washington D.C. who specializes in the Affordable Care Act and private health insurance.
ACA plans, or Affordable Care Act plans, refers to individual health insurance plans that meet the minimum essential coverage and other requirements set by the federal government.
“People often think that there’s a government plan called ‘Obamacare’ or ACA and a separate private market, but there’s not,” Riggs says. “ACA is a law, not a healthcare policy. Every major medical plan has to comply with it.”
Feeling overwhelmed? Let a HealthMarkets licensed insurance agent help you sort through your insurance options. Start online today or call us at (800) 827-9990.
COBRA vs. ACA: How to Decide
Several factors can help you determine whether COBRA or ACA is better for you.
1. Consider the cost. “For most people who just lost their job, COBRA is too expensive,” Riggs says. ACA plans tend to be much cheaper than COBRA rates. “If your adjusted gross income fits the guidelines, you can get a premium subsidy,” she says. How much the subsidy lowers your monthly premium depends on your age, who’s on your tax return and whom you claim, your ZIP code, and adjusted gross income.
2. Check your deductible. When you switch to an ACA plan, your deductible will reset. But if you opt for COBRA, you’ll keep any progress you made toward your annual deductible while you were employed.
“Those deciding between COBRA and ACA coverage will want to consider how much they have already expended toward out-of-pocket costs, whether they expect to need additional care (or, say, have a chronic condition), and the time of year,” Keith says.
For instance, if you’re close to the end of the calendar or plan year, it might make sense to sign up for COBRA before shifting to ACA coverage. To figure it out, you’ll want to add up the cost of COBRA premiums for the rest of the year against potentially higher out-of-pocket costs with an ACA plan.
If you’ve met your deductible and are close to (or have reached) your out-of-pocket maximum, your remaining COBRA payments might be less than starting a new plan with a brand-new deductible.
3. Think about whether you’re open to switching physicians. “No matter what plan you have, you have to see if your doctor is in network,” says Riggs. Networks change regularly, so it’s important never to assume your doctors will be covered.
If you want to keep your doctors, make sure they accept the new plan you’re choosing. This is especially critical if you have ongoing healthcare needs or chronic conditions and need to maintain access to your providers for continuing care, Keith says.
4. Pay attention to timing. People who lose their job-based coverage generally qualify for a 60-day special enrollment period through the ACA marketplace. That’s true even if you’re offered COBRA, Keith says. That means you have about two months to decide what to do.
However, if you choose to enroll in COBRA, you have to stick with that plan until the policy ends or until the annual ACA Open Enrollment Period, says Keith. You can’t switch to marketplace coverage simply because you want to drop COBRA coverage midyear.
So which should you choose?
The answer, of course, depends on your current situation, which includes everything from your family medical needs to the names on the tax return. The good news? You don’t have to navigate the decision alone. If you need help reviewing your options and finding the right plan, HealthMarkets licensed insurance agents can help at no cost to you. Start online today or call us at (800) 827-9990.